One year of Russia-Ukraine war & how it reshaped global supply chains

It has been a year already since Russia invaded Ukraine and exacerbated the already frail worldwide economic situation, including that of the global supply chains. The war particularly impacted the supply chains of agriculture and crude oil, and crippled the air cargo as well as maritime shipping sectors. With no resolution in sight, it’s worth examining the impact of the conflict on supply chains. With this special story, we attempt to review how the war has changed the way supply chains work across the world.

Global supply chains just got somewhat settled in the new world order post their ongoing recovery from COVID-19, when Putin ordered its troops to march into Ukrainian borders on 20th February 2022. As a result, though everything didn’t come crashing down again, the geopolitical stability received a huge blow. Supply chain leaders were once again facing a ‘somewhat unprecedented’ difficult situation and the panic season made a comeback.

Putin’s ‘special military operation’ in Ukraine crippled the supply chain operations emerging from, going through and ending in both the countries. It was literally a ‘two step forward, one step back’ situation. Many hundred tonnes of grains were burnt to ashes and an equal amount were stuck at the ports. Cargo ships and airplanes were destroyed, global crude oil supply heavily interrupted. Not to forget, both nations being major exporters of raw materials, the war prolonged the global semiconductor shortage.

Considering that the US and Europe received 12% software & IT services, 9% trading and distribution and 6% oil and gas from Ukraine and Russia, the region that was once critical to the health of global supply chains became a severe hazard.

ENERGY AND OIL

When it comes to energy supply to the West, Russia is one of the largest energy suppliers in the world, and Ukraine is a critical transit country for Russian natural gas exports. When the war unfolded, the supply of crude oil and natural gas was heavily impacted, causing the prices of both to fly off the charts. Consecutively, the cost of logistics by all modes of transport also spiraled, thereby triggering an inflationary trend in consumer products – quite the tumbling effect.

As the conflict continued, Russia used its position as a major energy supplier to the US and Europe as a political tool, threatening to cut off supplies in retaliation for sanctions imposed on it by the international community.

In response, European countries have sought to diversify their energy supplies, investing in renewable energy and seeking alternative sources of natural gas. The only good that came from this situation was the accelerated shift towards renewable energy, not only in the West, but worldwide.

AGRICULTURE

Ukraine and Russia are world’s largest exporters of food grains (Barley, Rye, Wheat, Corn, etc.), and Ukraine is also a major exporter of sunflower oil. The conflict has had a significant impact on the agriculture supply chain, disrupting exports and causing significant economic damage to the country’s agricultural sector. The conflict induced disruptions to the supply chain, making it difficult for farmers to access the necessary inputs, such as fertilizers and pesticides, to maintain crop yields. On the other hand, as a result of intensive shelling, crop fields were seen burning to ashes.


This is an abridged version of the story that was published in the March issue of Logistics Insider magazine. To read the complete version, please click here.


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